Each side has filed a Fed.R.Civ.P. ("Rule") 56 motion for
summary judgment on Count I.*fn3 For the reasons stated in
this memorandum opinion and order, McConnells' motion is
granted and S & L's motion is denied.

Alfred is a mortgage broker who, before investing in the
Project, had previously made only one oil and gas deal
investment — that too with the S & L partnership. Alexander is
a businessman who had previously made only two such investments
(both through his uncle). In each instance the investment has
been a fractional interest in an oil and gas deal acquired
since 1981 and has been retained for investment since
acquisition.

Because of his earlier investment with S & L, Alfred had the
opportunity to acquire an interest in the Project. Alfred
(lacking the funds to make the investment on his own) joined
with Alexander in making the investment, forming Odessa as a
partnership for that purpose. On or about August 27, 1982
Odessa paid $68,000 to purchase an undivided one-eighth
interest in the Project, which comprised three oil and gas
leases in Crawford County, Illinois.

S & L had written Alfred in Illinois soliciting his
participation in the Project. Odessa signed the Participation
Agreement in Illinois. Though S & L was obviously aware of the
Act's requirements, it did not register the oil and gas
interests as securities under Act § 5. Instead it attempted to
file with the Illinois Secretary of State an Act § 4 H report
of sale to Odessa nearly three months after the sale (on
November 17, 1982), but the report was unacceptable for filing
because untimely (Act § 4 H requires such filing within 30 days
after the date of sale).

When the Project proved a total failure, Alfred inquired as
to possible remedies against S & L, one of his inquiries being
directed to the Illinois Secretary of State. In response the
Secretary of State advised of S & L's unacceptable (because
tardy) effort at Act § 4 H filing, and Odessa (through its
counsel) promptly served a timely notice of rescission under
Act § 13 B. S & L refused to return Odessa's investment and
this action followed.

Odessa's Right to Rescission

Unquestionably the sale of the oil and gas interest to
Odessa had the requisite Illinois connections to become
subject to the Act. Illinois National Bank & Trust Co. of
Rockford v. Gulf States Energy Corp., 102 Ill. App.3d 1113,
1126, 57 Ill.Dec. 938, 947, 429 N.E.2d 1301, 1310 (2d Dist.
1981); Green v. Weis, Voisin, Cannon, Inc., 479 F.2d 462,
464-65 (7th Cir. 1973). Equally without question that interest
was a "security" under the Act, for Act § 2.1 includes within
that term any "fractional undivided interest in oil, gas, or
other mineral lease." Because the interest was not an exempt
security under Act § 3, Act § 5 required that it be registered
before sale unless the transaction (the sale to Odessa) was
exempt under one of the subsections of Act § 4.

Act § 4 H could have served as the predicate for exempting
the S & L-Odessa transaction, had a proper and timely post-sale
report been filed. It was not. Hence S & L must find its safe
harbor in Act § 4 D or not at all. That subsection exempts in
relevant part:

The sale of fractional undivided interests in any
oil, gas or other mineral lease . . . to any
association*fn5 or trader buying or selling
fractional undivided interests in oil, gas or
other mineral rights, in frequent operations, for
its or his own account rather than for the
account of customers, to such extent that it ...

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